For those of you newcomers to the world of Bitcoin, it is very common to ask questions like the title above. The background to the question also refers to: if Bitcoin is valuable in itself, why should it refer to the value of a fiat currency that is ideologically and systemically conflicting?
The problem is that Bitcoin's ideological value is not as black and white as it is, nor was it conveyed by Satoshi Nakamoto himself. There are areas where it is not free of value, although the ups and downs in the free, open, transparent, and eternal market.
Since the US dollar is in fact and the consensus is a global currency, based on the belief in the political and economic policies of the United States of America, there is no choice, that the value and price are pegged to the value of the US dollar, as we see in gold.
That one day the US dollar is not fully in power in the world trading system and is replaced by the yuan, something similar will also happen, that the BTC / YUAN pair will dominate or at least become an absolute choice.
In short, any object of value must be relative to the value of another object that is relatively strong and is used, so that the ratio is obtained. From there, there is a reference when buying and vice versa.
Now consider this fact, the price of Bitcoin has risen relative to the US dollar since March 2020. The pace is unstoppable, as it is heading for the region of US $ 14 thousand and most likely breaking the US $ 20 thousand marks as an all-time high.
That fact simply reflects the enormous demand for Bitcoin as an alternative asset to the US dollar and some other foreign currencies.
So, as Bitcoin's price rises relative to the dollar, yen, or ruble, it's clear that people living under the roof of the fiat economy feel they have a reason to transition, at least in part, to Bitcoin.
While still far from the all-time dollar highs of US $ 19,783-US $ 20,000 reached in December 2017 (close to the current US $ 14,000), the Bitcoin price has reached a relative high with other fiat currencies, including the Brazilian real, the Turkish lira, Argentine peso, Venezuelan bolivar, and several other world currencies in the last 30 days.
It is true that the main measuring instrument is BTC / USD, which is then converted to the local currency exchange rate, for example, USD / IDR.
But the fact is that Bitcoin has actually surpassed that all-time high in any other fiat currency. This is an important indicator of 2 things. First, there are acute problems in the fiat currency system. Not technology, but policy and management.
Second, the global value of fiat money into Bitcoin is the alternative option for this problem. It's really that simple!
See the BTC / LIRA pair has reached an all-time high, while BTC / USD has not.
This shows that the purchasing power of the lira against the USD has weakened. Of course, this is the impact of the reduced supply of dollars in the country, because of the economic sanctions by the US, an odd policy since 1971, in which the US dollar is no longer pegged to the value of gold.
Apart from sanctions, of course, there are domestic problems in Turkey, for example, high inflation, due to weak economic productivity.
In 2018, for example, Turkey's inflation rate reached 16.33 percent, then slightly decreased by 1.18 percent in 2019, based on data from Macrotrends.net.
So, if you are a citizen of Turkey, it would be better to buy Bitcoin whose main reference price is the US dollar, rather than the Turkish lira itself, to fight inflation.
That's just Turkey, not from other countries with the same fate, even worse than Turkey. Look at Argentina, Venezuela, Sudan, Suriname, and Zambia, all of which have experienced the highest BTC prices of all time this month and which account for nearly 3 percent of the world's population.
So, with the global economic situation that the IMF said has recently contracted 4 percent and even more in the coming years, the inflation situation will get worse for these countries, including other weak countries.
On the other hand, countries that are still applying negative benchmark interest rates, such as Japan, the European Union, and most likely the UK are considering, forcing more people to take their money out of banks and switch to Bitcoin, which is actually a high-risk asset and provides higher yields.
Isn't it riskier to keep fiat money under your pillow?